Floare v. Damian ( 2014 )

NOTICE: NOT FOR PUBLICATION.
UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION DOES NOT CREATE
LEGAL PRECEDENT AND MAY NOT BE CITED EXCEPT AS AUTHORIZED.
IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE
GAICA FLOARE, Plaintiff/Appellee,
v.
PETRE DAMIAN, Defendant/Appellant.
No. 1 CA-CV 13-0349
FILED 07-08-2014
Appeal from the Superior Court in Maricopa County
No. CV2012-005331
The Honorable J. Richard Gama, Judge
REMANDED
COUNSEL
Bellah Perez, PLLC, Glendale
By Sheila E. Harmer
Counsel for Plaintiff/Appellee
Florin V. Ivan PC, Glendale
By Florin V. Ivan
Counsel for Defendant/Appellant
FLOARE v. DAMIAN
Decision of the Court
MEMORANDUM DECISION
Judge Michael J. Brown delivered the decision of the Court, in which
Presiding Judge Kent E. Cattani and Judge Margaret H. Downie joined.
B R O W N, Judge:
¶1 Petre Damian appeals the superior court’s order denying his
motion to set aside a default judgment entered against him as a result of
disclosure and discovery violations. Because the record is not clear as to
whether fault for failure to comply with a discovery order was with
Damian or his counsel, we remand to the superior court for further
proceedings.
BACKGROUND
¶2 On March 26, 2012, Gaica Floare filed a quiet title complaint
alleging she agreed to pay Damian, her former brother-in-law, $75,000 to
purchase a property with the understanding that she would own the
property. Floare alleged further that Damian ignored their agreement by
taking title to the property in his name. Damian filed an answer on April
27. On May 4, Floare served Damian with a request for production of
documents, 1 uniform contract interrogatories, non-uniform
interrogatories, requests for admissions, and a request for entry upon
land.
¶3 On June 8, Damian’s counsel, Art Reategui, requested an
extension to June 29 to respond to the discovery requests, which Floare’s
attorney agreed to on the condition that Reategui provide Damian’s
disclosure statement at that time as well. On June 29, at Floare’s request,
counsel for both parties and Damian met to inspect the property, and at
that time, Reategui informed Floare that he would need more time to
provide the discovery responses. On July 2, Reategui e-mailed responses
to the requests for admission, non-uniform interrogatories, and request for
1 Floare requested copies of the real estate contract for the purchase
of the property at issue and a copy of Damian’s bank statement showing
the deposit of $75,000 made to his account.
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FLOARE v. DAMIAN
Decision of the Court
production. Reategui also indicated that the bank statement would be
forthcoming. On July 31, Floare informed Reategui by letter that despite
Reategui’s partial compliance with Floare’s request for production, she
had never received Damian’s disclosure statement, answers to the
uniform contract interrogatories, or the bank statement information.
¶4 On August 13, Floare filed a motion for an order compelling
the missing discovery responses and disclosure statement. 2 Floare
acknowledged recieving Damian’s July 2 discovery responses, but she
indicated that Damian had failed to provide the information outlined in
her July 31 letter. Damian did not respond to Floare’s motion to compel
discovery. The superior court granted the motion on September 19 and
ordered Damian to provide the missing discovery requests and disclosure
statement no later than October 12. The court also awarded attorneys’
fees of $672 to Floare.
¶5 After Damian failed to comply with the court’s order, Floare
filed a “Motion For Entry Of Default Judgment Or For Alternative
Sanctions Pursuant to Rule 37(B).” 3 Floare asked the court to strike
Damian’s answer, but noted that “a default judgment should only be
entered if the non-compliance was due to the willfulness or bad faith of
the party and not the party’s attorney[,]” and that “[a]n evidentiary
hearing is required to determine whether the failure to comply was the
result of the party’s own willfulness or bad faith.” Floare also explained
that “[a]t the hearing, the Court must make express findings as to (1)
whether the fault for the violation lies with the party or counsel; (2)
whether the violation was committed willfully or in bad faith; and (3)
2 We note that nothing in the record indicates that Floare’s counsel
complied with the certification requirement of Arizona Rule of Civil
Procedure 37(a)(2)(C), which states that “[n]o motion brought under this
Rule 37 will be considered or scheduled unless a separate statement of
moving counsel is attached thereto certifying that, after personal
consultation and good faith efforts to do so, counsel have been unable to
satisfactorily resolve the matter.”
3 Rule 37(b) sets forth several non-exclusive orders a court may issue
in response to a party’s failure to comply with an order to provide
discovery, ranging from designating certain facts as being established or
placing limitations on what evidence and claims or defenses the non-
complying party may introduce to the most severe: “rendering a judgment
by default against the disobedient party[.]” Ariz. R. Civ. P. 37(b)(2)(A-C).
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FLOARE v. DAMIAN
Decision of the Court
whether the egregiousness of the violation warrants the sanction of a
default judgment.”
¶6 Damian did not respond to Floare’s motion. On December
6, the court ordered the answer stricken and entered default judgment
against Damian. In doing so, the court reasoned that because Damian
failed to respond to the motion for default or provide the outstanding
discovery, his actions “represent[ed] extreme circumstances justifying
dismissal of the formal Answer.” The court also found that Damian had
“obstructed the discovery process and failed to participate in this action.”
The court then awarded Floare her attorneys’ fees and costs and entered a
signed judgment of quiet title on January 29, 2013.
¶7 Attorney Florin Ivan filed a notice of appearance as “co-
counsel” for Damian on February 22. On March 4, he filed a motion to
vacate the default judgment pursuant to Rules 55(c) and 60(c). 4
Specifically, Ivan argued the default judgment should be set aside because
striking Damian’s answer as a sanction without first conducting a hearing
“did not conform with due process.” Additionally, Damian avowed that
(1) he primarily speaks Romanian and that he does not speak or
understand English except for a few common words; (2) he was not told
he had to provide information to the court or Floare; and (3) he was
“shocked” when he found out he lost his property without a court
hearing.
¶8 The superior court denied the motion to vacate, finding
Damian “failed to provide a good cause explanation for his prior failure to
participate in the discovery of this action; failed to demonstrate a
meritorious defense; and [had] failed to demonstrate a viable basis for his
prior non-compliance with [the order to compel].” Damian timely
appealed from the court’s denial of his motion to vacate.
DISCUSSION
¶9 We review orders imposing sanctions for disclosure and
discovery violations for an abuse of discretion. Montgomery Ward & Co.,
Inc. v. Superior Court In & For Cnty. of Maricopa, 176 Ariz. 619, 621, 863 P.2d
911, 913 (App. 1993).
4 On the same day, Ivan served Floare with the disclosure statement
and responses to the outstanding discovery requests.
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FLOARE v. DAMIAN
Decision of the Court
¶10 As a threshold matter, Floare argues we should affirm the
superior court’s ruling because Damian’s motion to vacate was untimely.
Pursuant to Rule 55(c), an entry of default may be vacated “for good cause
shown” or in accordance with Rule 60(c). Ariz. R. Civ. P. 55(c). Because
Arizona law is well-settled that a party may not directly appeal from a
default judgment; the proper procedure for initiating a challenge to such a
judgment is by motion under Rule 55(c). Byrer v. A. B. Robbs Trust Co., 105
Ariz. 457, 458, 466 P.2d 751, 752 (1970). Damian filed his Rule 55(c)
motion just over a month after entry of the judgment; therefore, the
motion was timely filed.
¶11 Generally, a court has broad discretionary power to impose
sanctions for noncompliance with court orders compelling discovery and
disclosure. AG Rancho Equip. Co. v. Massey-Ferguson, Inc., 123 Ariz. 122,
123, 598 P.2d 100, 101 (1979). And, we follow the general principle that
neglect of an attorney is attributed to the client. Treadaway v. Meador, 103
Ariz. 83, 84, 436 P.2d 902, 903 (1968). However, “[w]here the party is not
guilty of misconduct in the discovery process he should not suffer default
as a result of his counsel’s guilty conduct.” Robinson v. Higuera, 157 Ariz.
622, 624, 760 P.2d 622, 624 (App. 1988). A court’s discretion may therefore
be limited when a party’s “failure to comply . . . [is] due to inability, and
not to willfulness, bad faith or any fault of petitioner[.]” Birds Int’l Corp. v.
Arizona Maint. Co., Inc., 135 Ariz. 545, 546, 662 P.2d 1052, 1053 (App. 1983)
(internal quotations omitted); see also Estate of Lewis v. Lewis, 229 Ariz. 316,
325, ¶ 29, 275 P.3d 615, 624 (App. 2012). Further, based on due process
considerations, the court’s discretionary power to enter a default as a
sanction “is more limited than when it employs lesser sanctions.” Lenze v.
Synthes, Ltd., 160 Ariz. 302, 305, 772 P.2d 1155, 1158 (App. 1989);
Montgomery Ward, 176 Ariz. at 622, 863 P.2d at 914 (“A party’s right to due
process limits a trial court’s authority to strike a pleading.”); see also U-
Totem Store v. Walker, 142 Ariz. 549, 553, 691 P.2d 315, 319 (App. 1984)
(“The law favors resolving a case on the merits rather than by default.”).
Even so, the trial court’s exercise of discretion “within those limits is
entitled to deference on appeal.” Lenze, 160 Ariz at 305, 772 P.2d at 1158.
¶12 Arizona courts have consistently followed the principle that
prior to imposition of a sanction that results in dismissal of a case, a court
should conduct a hearing to determine (1) whether fault for the violation
lies with the client or counsel; (2) whether the violation was committed
willfully or in bad faith; and (3) whether the nature of the violation
warrants the ultimate sanction of dismissal or some lesser sanction. See
e.g., Seidman v. Seidman, 222 Ariz. 408, 411, ¶ 20, 215 P.3d 382, 385 (App.
2009); see also Estate of Lewis, 229 Ariz. at 324, ¶ 20, 275 P.3d at 623;
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FLOARE v. DAMIAN
Decision of the Court
Montgomery Ward, 176 Ariz. at 622, 863 P.2d at 914; Lenze, 160 Ariz. at 306,
772 P.2d at 1159; Birds Int’l, 135 Ariz. at 547, 662 P.2d at 1054.
¶13 “Although an evidentiary hearing may often be necessary to
determine whether responsibility for obstructing discovery lies with the
party or with his counsel, such a hearing is not required when the facts are
apparent from the record.” Hammoudeh v. Jada, 222 Ariz. 570, 572, ¶ 7, 218
P.3d 1027, 1029 (App. 2009). Thus, “[d]ue process does not require that a
hearing be held in every case,” even where “sanctions of dismissal or
entry of default judgment” are entered. Robinson, 157 Ariz. at 624, 760
P.2d at 624; see also Marquez v. Ortega, 231 Ariz. 437, 444, ¶ 27, 296 P.3d
100, 107 (App. 2013) (affirming denial of plaintiff’s motion to extend
deadline for discovery without a hearing where record was clear that
plaintiff’s attorneys were at fault and the sanction imposed was not
tantamount to a dismissal).
¶14 The superior court’s findings here do not offer any
indication whether Damian or his counsel was responsible for the
discovery violations. Additionally, nothing in the record suggests why
Reategui essentially disappeared from the litigation after Floare filed her
motion to compel. As to Damian, the only information in the record
relevant to his involvement in the discovery requests is attached to his
motion to vacate, in which he avowed he was shocked when he found out
that he was in jeopardy of losing his property and “was not told that [he]
must provide some information to the Court or [to Floare].” Thus, the
existing record does not support a finding that Damian was aware of the
discovery issues, much less that he acted willfully or in bad faith to
obstruct the process. We therefore conclude that the superior court erred
in denying the motion to vacate without first conducting a hearing to
determine responsibility for the disclosure and discovery violations. See
Lenze, 160 Ariz. at 306, 772 P.2d at 1159 (holding that trial court should
have held an evidentiary hearing prior to imposing default judgment as a
sanction); 5 cf. Hammoudeh, 222 Ariz. at 572, ¶¶ 7-8, 218 P.3d at 1029
5 In Lenze, the trial court granted plaintiff’s motion to strike the
defendant’s answer based on repeated failures to attend scheduled
depositions. 160 Ariz. at 303-04, 772 P.2d at 1156-57. After default
judgment was entered, new counsel unsuccessfully moved to set aside the
default judgment. On appeal, we remanded for an evidentiary hearing
because the record did not “reveal whether any facts were raised before
the trial court to indicate whether the failure to comply with the discovery
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FLOARE v. DAMIAN
Decision of the Court
(holding that an evidentiary hearing is not necessary when there were
numerous instances in the record demonstrating that the defendant
“personally attempted to mislead [the plaintiff] and the court with his
incomplete discovery responses.”).
¶15 Floare requests an award of attorneys’ fees on appeal
pursuant to Arizona Revised Statutes section 12-1103. Because we are
remanding for further proceedings, the request is denied without
prejudice. The superior court may consider awarding such fees pending
the ultimate outcome of the litigation and determination of the successful
party.
CONCLUSION
¶16 Based on the foregoing, we conclude that the superior court
erred in denying Damian’s motion to vacate without conducting a hearing
to determine responsibility for failure to comply with the discovery order.
We therefore remand for further proceedings. If the court finds that
Damian had knowledge of the discovery order and that he willfully or in
bad faith failed to comply, the default judgment shall remain in effect. See
Lenze, 160 Ariz. at 306, 772 P.2d at 1159. Alternatively, if the court finds
that Damian was not at fault, the default judgment shall be vacated and
consideration of the quiet title dispute shall continue. Id. In such case, the
court may impose other sanctions it deems appropriate under Rule 37. Id.
:gsh
order was the fault of appellant’s former counsel as opposed to
appellant.” Id. at 306, 772 P.2d at 1159.
7